Archived copy: New York fintech startup Ocrolus planning to cash in on PPP loan spotlight

When small businesses grew frustrated in the spring with waiting in line for federal Paycheck Protection Program loans from JPMorgan Chase and Bank of America, some turned to digital lenders approved to originate the funds, such as Square and Cross River Bank.

That provided an opportunity not only for those companies to expand their lending but also for a Lower Manhattan startup, Ocrolus. The firm used artificial-intelligence software to rapidly process and analyze the hundreds of documents in each application to the lenders—which were submitted in a hodgepodge of PDFs, images and text files.

“We could quickly automate hard-to-read documents into perfect data,” Ocrolus CEO Sam Bobley said. “So our customers, the lenders, were not losing time on correcting errors and instead could get that money out much more quickly.”

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Ocrolus helped the upstart Cross River Bank process almost as many government loans as Bank of America, JPMorgan Chase and Wells Fargo.

Building off that momentum, Ocrolus plans to add 30 employees in the next two months to its 100-person city office. An SEC filing shows the company raised $12 million from investors last month, though Bobley said that money is part of a larger funding round the firm hopes to close in the fall.

Ocrolus is among many fledgling fintech firms hoping to turn their crisis response into new opportunities. Lenders—both digital banks and financial giants—faced an unprecedented surge of demand for loans while operating remotely for the first time. That opened a lot of doors for tech companies that could promise quick solutions to their headaches.

“The PPP loan process was a huge opportunity for a lot of fintech companies to show that they are mature enough to work within government policies,” said Alex Kern, an industry analyst at CB Insights, a research firm in Midtown.

CB Insights this week released its annual Fintech 250 list, identifying startups positioned to be the next big things in the sector. Ocrolus was one of 36 New York firms on the list, a state total second only to California. Kern said the firms on the list are mostly business-to-business concerns, offering software that either automates pen-and-paper work or makes communications easier while people are working remotely.

The PPP arena was not the only recent opportunity for fintech startups, noted Maria Gotsch, co-founder of FinTech Innovation Lab, a mentoring hub in Lower Manhattan for startups. She cited Alloy and Enigma—both New York–based graduates of the lab—as startups that banks are turning to for help gauging financial risks.

“Some customer data, which could be from fourth-quarter 2019, had no reality in many cases on where they are today,” Gotsch said. “There is a huge need for more current information for financial institutions to deliver not just PPP loans but all other credit products as well.”

But despite digital demand, venture-capital investment—the lifeblood of the industry—is becoming harder for new firms to secure. CB Insights data show that the amount investors are putting into fintech is equal to a year ago, but with far fewer deals. That means investors are focusing on established firms, which can land “mega rounds” before going public.

“There’s an expression that you don’t exchange business cards in a disaster,” Gotsch said. “During a crisis, people will fall back on existing relationships.”

In the current environment, some startups could be scooped up by bigger players that want their technology, particularly companies that serve sectors hard hit by the Covid-19 pandemic.

American Express last month agreed to buy Kabbage, a digital small-business lender in Atlanta, for a reported $850 million. But the deal left out the firm’s portfolio of loans to small businesses, many of which likely have struggled since March.